Date: November 2, 2018
U.S. Payrolls Rise More Than Forecast as Wage Gains Hit 3.1%
American workers enjoyed the biggest leap in pay since 2009 as job gains topped forecasts and the unemployment rate held at a 48-year low, a boost for President Donald Trump ahead of next week’s midterm elections and reason for the Federal Reserve to keep raising interest rates. Nonfarm payrolls rose 250,000 after a downwardly revised 118,000 gain, a Labor Department report showed Friday. The median estimate in a Bloomberg survey called for an increase of 200,000 jobs. Average hourly earnings for private workers advanced 3.1 percent from a year earlier and the unemployment rate was unchanged from September at 3.7 percent, both matching projections. The figures give Republicans another economic accomplishment to tout ahead of Tuesday’s midterm elections as they seek to defend control of Congress from what polls indicate will be Democratic gains. The continued hiring and wage increases also reflect a tax-cut boost and reinforce expectations that the central bank will raise interest rates for a fourth time this year in December, though such an outlook may further unsettle investors who just sent U.S. stocks to their worst month since 2011.
U.K. Lawmakers Approve Budget Tax Cuts as Focus Turns to Brexit
U.K. lawmakers approved government plans to bring forward cuts to income tax and other changes to taxation announced Monday by Chancellor of the Exchequer Philip Hammond in his budget statement. Members of Parliament voted in favor of the government’s budget resolutions, which allow 80 tax measures to take effect immediately. It paves the way for the government’s Finance Bill to being its passage through Parliament to make the changes permanent. The key measure was the decision to bring forward by a year an increase to Britons’ tax-free personal allowance to 12,500 pounds ($16,250) a year, and to raise the threshold at which they start paying a higher rate of income tax.
Biggest Italian Factory Slump Since 2014 Hits Euro Economy
Italian manufacturing shrank the most in almost four years in October, hinting at continued weakness after the economy failed to grow in the third quarter. IHS Markit’s factory index for the country dropped below the key 50 mark, meaning a contraction — the first since August 2016. Output shrank for a third month and new orders fell as optimism took a knock from slower global demand and “worries over political stability.” The euro-area manufacturing PMI slid to 52.0, below the initial estimate of 52.1 and the weakest reading in more than two years. The figures are another blow to Italy after last quarter’s stagnation, led by industry. Amritpal Virdee, an economist at IHS Markit said the sector may drag down wider economic growth again this quarter. Italy’s populist government says the slump makes their expansionary fiscal plan even more necessary, even as critics fret about the country’s huge debt pile. The administration intends to stick to its controversial budget plans despite criticism from the European Union and the country’s central bank.
Global Bonds Drop After Stocks Jump on Trump’s China Trade Talks
Global bonds dropped as investors dumped haven assets and turned to stocks on dissipating fears of a U.S. trade war with China. Benchmark securities in Germany, Australia and the U.S. were among the biggest losers as equity markets across Asia and Europe rallied following an October sell-off. That followed a report U.S. President Donald Trump wants to reach an agreement on trade with Chinese President Xi Jinping. “The display of optimism after the Xi/Trump phone call goes some way towards alleviating one of the fears that weighed heavily on risk sentiment in the past weeks,” said Antoine Bouvet, an interest-rates strategist at Mizuho International Plc. The yield on 10-year German bonds rose three basis points to 0.43 percent as European markets opened, with equivalent Australian yields up five basis points and Treasury yields four basis points higher at 3.17 percent. Treasury yields may be set to rise more than for bunds in the short term, according to Arne Lohmann Rasmussen, head of fixed-income research at Danske Bank A/S. If the positive sentiment continues there could be a new test of the 3.25 percent level in 10-year Treasury yields over the next two weeks, he said, pointing to a seven-year high touched last month.